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Robin D., Senior Tax Advisor 4

Category: Tax

Satisfied Customers: 8631

Experience: 15years with H & R Block. Divisional leader, Instructor

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I am receiving a canadian inheritance soon and want to pay

Resolved Question:

I am an american citizen living in florida and I will be receiving a canadian inheritance soon and want to pay off my mortgage in florida. I am canadian citizen and also usa citizen. Can I pay off my mortgage from my residence in florida without paying taxes to the usa? Jill thanks...

Hello and thank you for using Just AnswerIf the inheritance you are anticipating is going to be money then you will not pay tax in the US on the infheritance. If yo are inheriting property or an account and then will sell or receive a distribution of the inheritance paying off your mortgage will not prevent you from taxation on the sale or the account distributions to you.

Robin D :

If you receive property and it is transferred to your name before you sale you will be allowed the basis of the Fair Markert Value on date of death. This may result in a gain or a loss for you when you sale.

Robin D :

If you inherit an accout it will be taxable to you if the money in the account was never taxed when contributions were made to the account.

Customer:

I will receive 100,00.00 in the form of a bank draft into a canadian bank account that I already have established I want to simply have the canadian bank issue the money straight toward my suntrust bank account who also holds my mortgage Is there any problems with this that you may forsee. The money is from guaranteed investment certificates which all taxes have already been paid on.

Robin D :

If you received the certificates then you will need to report the transaction on your US return. If the amount is not over $100,000 then you would not be required to use Form 3520 but you do need to report the account on Form 90-22.1 (F-BAR) because the amount is over $10,000 in a foreign bank account (not in US). It will not matter if you payoff your mortgage, any tax to US on the receiving of the certificates will still need to be shown on your US return but you can use the Foreign Tax credit to show the Canadian tax (I am assuming) that was paid.

Robin D :

I will need to check on the certificate tax situation for US, one sec

Robin D :

OK, quick crash course on those. You would show the GIC as interest. Like a US Certificate of Deposit.

Robin D :

Only the interest earned will be taxable to US not the entire amount. The foreign tax credit will show the tax already paid in Canada

Customer:

so when do i show the foreign tax credit, when I pay my taxes that year or when I pay off the mortgage with that money?

Robin D :

With your tax return

Robin D :

It is Form 1116

Robin D :

It would reduce any US tax based on the amount paid in Canada

Robin D :

Mke sur eyou report the foreign bank account on 90-22.1

Robin D :

Make sure *sorry

Customer:

do you think i will have to pay any taxes then?

Robin D :

Canada and US are very close in taxation. Ususally if the foreign tax paid is not as much as the US tax that would be owed then you pay the difference. It will all come down to your total income for the year and how much interest was in that $100,000 also.

Robin D :

Remeber though, you only add the interest not the $100,000

Customer:

yes but it is an inheritance money from my moms death in canada?

Robin D :

It is not the inheritance that you are taxed on, it is the earned amount that your mother woudl have had

Robin D :

I understand, I can just advise you about the uS taxation on you as a US citizen and the property you have inherited.

Customer:

it is money that was already taxed and paid for in canada from my mother. roughly then how much money will i have to pay then when I do the income tax keepingin mind i am paying off my mortgage with the 100,00.00 and nothing will be left.

Robin D :

Your mortgage payoff has no play in your taxation for this. Interest is just added to your other income and then your regular deductions and credits apply. I cannot even give you an estimate because it would require doing your entire retrun, I don't know what all you have ,don't know the interest amount, don't know how much Canadian tax you paid on the interest already,....I could go on and on but basically I cannot give an estimate based on your information.

Robin D :

I hope you can agree though that I addressed your initial question and have explained all your tax reporting obligation

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. OrvilleHesperia, California

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